PHARMSTANDARD – LEADING RUSSIAN PHARMACEUTICAL COMPANY · PHARMSTANDARD – LEADING RUSSIAN...

2009 Analyst Day Presentation, 2 September 2009

1H 2009 ResultsAnalyst Day Presentation

2 September 2009

PHARMSTANDARD – LEADING RUSSIAN PHARMACEUTICAL COMPANY

2009 Analyst Day Presentation, 2 September 2009 2

Name Title

Igor Krylov CEO

Elena Arkhangelskaya CFO

Stanislav Reshetnikov Marketing Director

Anton Golubok Head of IR

Presenting Team

Viacheslav Burmistrov Medical Director


Topic Presenter

Section 1

10.00 – 10.30 Business and Strategy Igor Krylov

10.30 – 11.00 1H 2009 IFRS Results Elena Arkhangelskaya

11.00 – 11.20 Section 1 Q&A All

Coffee Break

Section 2

11.50 – 12.50 Marketing ` Stanislav Reshetnikov

12.50 – 13.20 Medical Division. R&D Viacheslav Burmistrov

13.20 – 14.00 Q&A All

Agenda


Business & Strategy

Igor Krylov, CEO


Market

Production

Sales &Marketing

Financials

Leading domestic pharmaceutical company in Russia (measured by sales)

• #4 pharma company overall in Russia

• #1 pharma company in the commercial segment

• #1 domestic pharma company

Modern and efficient manufacturing facilities

• 4 pharmaceutical production sites and 1 medical equipment and disposables plant

• Russian standards compliant facilities, six lines on Kursk are EU GMP compliant

• More than 200 pharmaceutical products

• Capacity – more then 1,3 billion packs

Experienced sales force & Market leading brands

• 460 sales people

• Top best selling brands

• Launched 39 new products from 2004

Industry leading growth and profitability

• Leading EBITDA (39%) & Gross profit (48%) margins

• Total Sales of RUR 10 062 mln in 1H 2009, representing 62% growth

Pharmstandard at a Glance


Company• Pharmstandard increased its participation in FRP programme (23% from PHST total sales); and supplied Velcade® (INN:

bortezomib) for the total amount of RUR2,505 mln (including 10% VAT);• Under 7 nosologies programme, Pharmstandard won tender for delivery of Rastan for 2H2009 amounting RUR 71 mln

(26% of total auction amount).• Arbidol is proven to be active against viruses A/H1N1 California and Moscow strains;• In 1Н 2009, the management adopted a decision of reorganizing Group’s structure. This plan provides the reorganization

of OJSC “Pharmstandart” in the form of joining OJSC “Pharmstandart - Octyabr” and CJSC “Masterlek”. OJSC “Pharmstandart - Octyabr” and CJSC “Masterlek” will be incorporated to OJSC “Pharmstandart”.

• Pharmstandard signs an agreement with Pharmapark on marketing and exclusive sales of Altevir® (gepatology). Starting from April 2009, sales of Altevir® reached RUR14 mln;

• Pharmstandard has become a full member of the International Pharmaceutical Excipients Council (IPEC) Europe.• Pharmstandard and ZAO “Apteki 36.6” signed an agreement on direct collaboration (trade contract).

Financials – 1H 2009• Revenue growth +62%; total revenue 10,061 mln RUR• Gross profit growth +31%; gross profit 4,775 mln RUR or 48% of sales• EBITDA* growth +51%; EBIDTA 3,952 mln RUR or 39% of sales• Net profit growth + 47%; net profit 2,5588 mln RUR or 26% of sales

1H 2009 Achievements

* - excluding foreign exchange gain or loss


Pharmaceuticals97% of 1H 2009 sales

Medical Equipment

3% of 1H 2009 sales

OTC56% of 2008 sales

Rx44% of 2008 sales

Therapeutic focus:AnalgesicsCough & cold Vitamins Anti-viral Anti-fungal

Product portfolio includes:Coronary TherapyAcid pump inhibitorsNitrites & nitratesACE inhibitorsAlimentary tract metabolism

Product portfolio includes:Sterilisers Distillers Medical disposables

62% revenue growth in 1H 200932% organic growth in 1H 2009

33% growth (24% organically1) 203% growth (52% organically2) 48% decrease

1H 2009 Sales Structure

1 – excluding Afobazol. IRS-19, Imudon 2 – excluding Velcade, Mildronate


OTHER66,52%

GEDEON RICHTER (3,1%)3,31%

SANOFI-AVENTIS (3,6%)3,60%

BERLIN-CH/MENARINI (3,5%)3,64%

BAYER HEALTHCARE (2,9%)3,84%

SANDOZ (3,3%)3,21%

NYCOMED (2,9%)2,99%

PHARMSTANDARD (5,4%)4,77%

NOVARTIS (3,1%)2,90%

SERVIER (2,9%)2,83%

STADA ARZNEIMITTEL AG (2,2%)2,39%

Market Share – All Companies Market Share – Retail Segment

#4 pharma company in Russia overall#1 domestic pharma company

#1 in Retail segment

OTHER66,81%

BERLIN-CH/MENARINI (2,9%)3,09%

PHARMSTANDARD (4,1%)3,83%

BAYER HEALTHCARE (3,3%)3,84%

SANOFI-AVENTIS (3,7%)3,87%

TEVA PHARM (1,9%)2,90%

GEDEON RICHTER (2,6%)2,87%

NOVARTIS (4,6%)4,57%

SANDOZ (2,8%)2,87%

ROCHE (2,9%)2,72%

NYCOMED (2,5%)2,64%

MS in 1H 2009

(1H 2008 – in brackets)

PHST – Leading Russian Pharmaceutical Company


1. Promote our market-leading brands to drive sales growth and profitability

2. Launch new products on a regular basis

3. Expand sales and marketing effort

4. Grow through acquisitions and realize synergies

5. Cooperation with leading pharmaceutical companies

6. Continue to actively control costs

7. Exploit opportunities arising from government funding of healthcare

Building the leading pharmaceutical company in Russia

Strategy


2020 Russian Pharma Strategy*• Provision with domestically produced medicines• Harmonization of Russian standards of medication development and production with international requirements• Stimulation of innovative medications development and production, support of Russian medications export• Protection of the internal market from unfair competition• Technical re-equipment of the Russian pharmaceutical industry• Quality conformity confirmation of medications. Eliminating excessive administrative barriers during registration of

domestic medicines• Educational system for preparation of specialists for the pharmaceutical industry

By 2020• Domestic products consumption – 50% of total market by value• Share of innovation preparations on the domestic market – 60% of total market by value• Increase of export by 8 times compared to 2008• Provision of medicinal safety of the RF in compliance with the list of life-saving drugs• Stimulation of domestic substances production sufficient for production of 50% of total drugs by value

* - Strategy of pharmaceutical industry development in the Russian Federation for the period up to the year 2020

• New list of life-saving drugs. Price control (project).

• GMP production facilities certification for budget procurement from Jan 2010 (project)

• 15% price preference for local producers in budget tenders

• New law about pharmaceutical products (project)

2009-2020 budget: RUR 177 bnPHARMA

2020

Goals

Expected Results

Cu

rren

tSt

eps

Bu

dget


1H 2009 Financial Results

Elena Arkhangelskaya, CFO


Revenue Analysis

4 3245 732

1 327

1 737

273

526

2278

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

8 000

9 000

10 000

1H 2008 1H 2009

OTC Rx Medical Equipment Others Velcade

Sales structure, RUR mln

Total sales grew by 62%

10062

6199

OTC: +33%+ RUR 1 408 mln

Rx: +31%+ RUR 410 mln

ME: - 48%- RUR 253 mln

Velcade:+ RUR 2 278 mln

Source: Company data, IFRS FS


EBITDA*Gross Profit

Margins

Gross profit margin (excluding Velcade) - 60%EBITDA margin (excluding Velcade) - 50%


3 650

4 684

91

59%

48%

0

2 000

4 000

6 000

8 000

1H 2008 1H 2009

Gross Profit Velcade GP Margin, % Organic GP Margin, %

* - excluding foreign exchange gain or loss

60%

2 763

3 692

86

42%

39%

0

2 000

4 000

6 000

8 000

1H 2008 1H 2009EBITDA VelcadeEBITDA Margin, % Organic EBITDA Margin, %

50%


General and Administration CostsSelling and Distribution Costs

Competitive Cost Structure

1H 2009 Pharmstandard SG&A costs - less 13%


47%50%

28% 29%

22% 24%

9%

16%

0

1 000

2 000

3 000

1H 2008 1H 20090%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Marketing Labour costsOther As % of salesAs % of sales (excluding Velcade)

964

64% 63%36% 37%

3%

5%

0

1 000

2 000

3 000

1H 2008 1H 20090%

3%

6%

9%

12%

15%

Labour costs Other As % of sales As % of sales (excluding Velcade)

943

12%

4%


Net Profit

Profitability

Net profit growth of 47%Income tax rate has been decreased to 20% from 24%


1 757

2 588

28%

26%

0

1 000

2 000

3 000

4 000

5 000

1H 2008 1H 20090%

5%

10%

15%

20%

25%

30%

35%32%


Capital Expenditure (PPE*), mln RURIFRS basis, mln RUR

Debt summary, 1H 2009, USD

Facility A: US$40.4m (maturity Dec-2009) Facility B: US$38.8m (maturity Dec-2011)

Debt: US$54m

Consolidated Balance Sheet and CAPEX


1H 2009 1H 2008 Long-term assets 10,076 10,264

Trade receivables 6,463 4,761incl.Velcade trade receivables 1,757Cash and cash equivalents 2,280 186Other assets 4,103 2,999Total assets 22,922 18,210Total equity 15,437 12,614Payables 4,576 1,708incl.Velcade payables 2,243Long-term borrowings and loans 608 761Current portion of long-term borrowings 1,048 1,583Other liabilities 1,544 1,379Total liabilities 7,483 5,596Total equity and liabilities 22,922 18,210

111

661

189

889 890

687

0

200

400

600

800

1 000

2004 2005 2006 2007 2008 1H 2009

* - Ufa (ampules), Tomsk (tablets – Arbidol, Amixin, Imudon)


1H 20091H 2008

Katren; 15,7%

Protek; 12,5%

CIA; 12,3%ROSTA; 8,30%

Apteka-Holding;

5,90%

Others; 28%

Distributors

Payment terms • Russia retail – up to 90 days• Export – up to 180 days

Katren; 18,6%

Genesis; 17,6%

Protek; 10,8%CIA; 9,3%

ROSTA; 7,2%

Others; 37%


GDR; 25,0%

Local shares; 18,3%

Augment Inv. Ltd; 56,7%

Share Capital

1H 20092008

In 2009 Augment Investment Ltd. reacquired 55,000 ordinary shares representing a minor part of share capital.

After these transactions, 45.7% of share capital was publicly listed of which 27.6% on LSE.

GDR; 27,6%

Local shares; 18,1% Augment Inv.

Ltd; 54,3%


Marketing

Stanislav Reshetnikov, Marketing Director


Marketing

1. Marketing Department2. Market Trends3. Pharmstandard on the Market4. Top Products Review


Marketing Department Structure


Staff as of 1H2009: 457 peopleActively promoted OTC brands: 17Actively promoted Rx brands: 12Target groups: pharmacies, GPs, pediatricians, gynecologists, cardiologists,

neurologists, dermatologists, gastroenterologists, hepatologists, oncologists

2009 Marketing & Sales Force Structure


Changes 2008-2009:• Formation of unified marketing division and OTC/Rx sales force divisions (rejection of business units system)

• “Cross-products”: Arbidol, Afobazol, Amixin, Flukostat, Mildronat

Main Changes in Structure 2008-2009


Key Information Sources for Decision-making Process


Marketing Division Development: 2H 2009

• Improvement of portfolio synergy, forming of “product basket”for each medical target audience

• Further optimization of ETMS (new approach for customer potential estimations)

• Systematic revision of marketing & sales force in the light of dynamically changing external and internal factors

Goal: more effectiveness, less costs


Marketing



Russian Pharmaceutical Market Development

Russian pharmaceutical market keeps the positive trend as it was in 2006-2008 (growth in commercial segment 1H 2009/1H 2008: + 33%)

181230

289

137182

63

48

71

35

40

25

28

29

14

15

2006, RUB 2007, RUB 2008, RUB 1H'08, RUB 1H'09, RUB

RU

B b

ln

RETAIL FRP HOSPITAL

+27%

-24%

+10%

+26% +33%

+48%

+16%

+4%

+12%


Russian Pharmaceutical Market Development

Market volume keeps on the same level as in previous period

3,63,8 3,8

2,0 1,9

0,20,1 0,1

0,1 0,1

0,5 0,4 0,3

0,2 0,1

2006, U 2007, U 2008, U 1H'08, U 1H'09, U

U b

lnRETAIL FRP HOSPITAL

+6%

-45%

-21%

+1%

-2%

-6%

-11%

-22%

-9%


Average price dynamics by segments, RUR

Average price in retail segment is growing (+35% 1H’09 vs. 1H’08)

50 60 75 70 94

279

382

600 576

752

56

78

10389

110

2006 2007 2008 1H'08 1H'09

RU

BRETAIL FRP HOSPITAL

+37%

+39%

+25% +35%

+57% +31%

+32%

+23%

+20%


0

500 000 000

1 000 000 000

1 500 000 000

2 000 000 000

2 500 000 000

COMMERCIAL FRP HOSPITAL

IH'08 II'08 IH'09

-1,5%

+3,7%

-9,2%

+8,4%

-11,1%

-6,4%

Market Segments 1H08/2H08/1H09 by Volume, Units

• Visible declining in 2H08 with positive trend in 1H09 (retail and hospital segments)


Market Segments 1H08/2H08/1H09 by Value, RUR

0

20 000 000 000

40 000 000 000

60 000 000 000

80 000 000 000

100 000 000 000

120 000 000 000

140 000 000 000

160 000 000 000

180 000 000 000

200 000 000 000

COMMERCIAL FRP HOSPITAL

IH'08 II'08 IH'09

+32,9%

+20,2%

+16,1%

+12,5%

+11,9%

+0,4%

• Value growth in retail segment 1H09/1H08 + 33%


By Value, RURBy Volume (units)

Low-tier & High-tier retail segments 1H09 vs. 1H08

• High-tier segment grew in volume and in value (+29% and + 38% respectively)

< 100 RUR per unit

> 100 RUR per unit

< 100 RUR per unit

> 100 RUR per unit0

1 000 000 000

2 000 000 000

1 H'08, U 1 H'09, U

-10,6%

0

15 000 000 000

30 000 000 000

45 000 000 000

1 H'08, RUB 1 H'09, RUB

-6,2%

0

250 000 000

500 000 000

750 000 000

1 H'08, U 1 H'09, U

+29%

> 100 RUR per unit

0

50 000 000 000

100 000 000 000

150 000 000 000

200 000 000 000

250 000 000 000

1 H'08, RUB 1 H'09, RUB

+38,3%


By Volume, units, %By Value, RUR, %

Retail Segment - Imported vs. Local

• Volume share of local products in 1H09 demonstrates tendency to grow (till 2008 – declining trend!) • Pharmstandard volume share grew from 8,8% to 10.6%

• Value share of local products in 1H09 is reducing (mostly due to price increase of imported remedies)

75,7% 75,3% 75,0% 74,7% 75,5%

24,3% 24,7% 25,0% 25,3% 24,5%

2006 2007 2008 IH'08 IH'09

IMPORT DOMESTIC

32,4% 34,2% 36,1% 35,7% 35,7%

67,6% 65,8% 63,9% 64,3% 64,3%

2006 2007 2008 IH'08 IH'09

IMPORT DOMESTIC


By Volume, units, %By Value, RUR, %

Retail Segment - OTC vs. Rx

75,2% 74,1% 73,3% 73,8% 72,5%

24,8% 25,9% 26,7% 26,2% 27,5%

2006 2007 2008 IH'08 IH'09

OTC RX

c

49,8% 49,1% 50,2% 50,3% 49,9%

50,2% 50,9% 49,8% 49,7% 50,1%

2006 2007 2008 IH'08 IH'09

OTC RX

• In value: ratio between OTC and Rx keeps stable• In volume: Rx share is growing up (due to unsaturated ATC categories)


1H09 vs. 1H08: Summary

• Russian pharmaceutical market keeps the positive trend as it was in previous years (retail segment 1H 2009/1H 2008: + 33% in RUR)

• Key point in 1H 2009: increase in average in-market price what is linked both with changing in RUR\USD ratio and risk management (increase in distributors and retail mark-ups)

• Retail market volume 1H 2009/1H 2008 is quite stable (-1.5%) with growth 1H 2009/2H 2008 (+3.6%)

• Volume share of local products tends to increase, value share is declining due to price increase of imported products

• Ratio between OTC & Rx – with no visible dynamics


Marketing



TOP-10: retail sales 1H09/1H08 by Value, RUR

Pharmstandard retail sales growth: +19%

+19,0% +76,0% +39,5% +32,2% +44,1% +29,5% +37,4% +24,4% +32,2% +42,6%0

1 000 000 000

2 000 000 000

3 000 000 000

4 000 000 000

5 000 000 000

6 000 000 000

7 000 000 000

8 000 000 000

9 000 000 000

10 000 000 000

PHARMSTANDARD BAYERHEALTHCARE

BERLIN-CH/MENARINI

SANOFI-AVENTIS

GEDEONRICHTER

SANDOZ NYCOMED NOVARTIS SERVIER STADAARZNEIMITTEL AG

IH'08 IH'09


Average Price Dynamic (Retail) of Top-10 by value (RUR)

• Pharmstandard keeps stable average retail price

-0,2% +18,2% +50,3% +42,2% +33,7% +33,0% +25,0% +18,3% +39,5% +37,5%0,0

100,0

200,0

300,0

400,0

500,0

600,0

PHARMSTANDARD BAYERHEALTHCARE

BERLIN-CH/MENARINI

SANOFI-AVENTIS

GEDEONRICHTER

SANDOZ NYCOMED NOVARTIS SERVIER STADAARZNEIMITTEL AG

IH'08 IH'09


+19,2% +2,7% -16,4% +22,2% +3,8% +20,7% +21,2% -7,2% +2,7% -17,7%0

50 000 000

100 000 000

150 000 000

200 000 000

250 000 000

PHARMSTANDARD MEDISORB BIOTEK TATHIMPHARMPREPARATY

STADAARZNEIMITTEL AG

URALBIOPHARM PHARM-CENTER BERLIN-CH/MENARINI

DALHIMPHARM SLAVYANSKAYAAPTEKA

IH'08 IH'09

• Pharmstandard growth in value (+19%) was stipulated mainly by increase in volume (+19.2%)

TOP-10: retail sales 1H09/1H08 by Volume, Units


Marketing



Best Selling Brands 1H 2009

№ BRANDVolume (mln

packs) Sales (mln RUR)% of total

salesVolume (mln

packs)Sales (mln

RUR)% of total

sales Change % Change %1 Velcade 0,040 2 278 23% 0,000 0 - 0,040 - 2 278 -2 Arbidol 12,329 1 475 15% 9,962 1 021 18% 2,368 24% 454 44%3 Pentalgin 18,306 945 10% 14,051 690 12% 4,255 30% 255 37%4 Mildronate 3,087 674 7% 3,089 627 11% -0,002 0% 46 7%5 Complivit 7,164 487 5% 5,426 342 6% 1,738 32% 144 42%6 Codelac 3,392 339 3% 2,762 157 3% 0,630 23% 183 116%7 Phosphogliv 0,934 326 3% 0,727 238 4% 0,206 28% 88 37%8 Flukostat 2,700 316 3% 2,343 272 5% 0,357 15% 44 16%9 Terpincod 2,151 302 3% 9,083 799 14% -6,932 -76% -497 -62%

10 Afobazol 1,297 191 2% 0,000 0 0% 1,297 - 191 -Other brands 282,024 2 413 25% 236,855 1 504 27% 45,169 19% 909 60%TOTAL SALES 333,424 9 747 100% 284,297 5 651 100% 49,127 17% 4 095 72%

1H 2009 1H 2008 Volume 09/08 Sales 09/08

Pharmstandard demonstrated total value growth (excluding Velcade) of 32%, (17% volume growth)


2009 New Products

Product Date Description ATC value, US$ mlnComplivit Anti-stress Jun09 A11A - multivitamins with minerals 252Complivit Siyanie Sep09 A11A - multivitamins with minerals 252Complivit Diabetes Jun09 A11A - multivitamins with minerals 252Mildronate, ampules Aug09 C01D - coronary therapy excluding calcium antagonists and nitrites 113Traneksam Sep09 B02A - antifibrinolytics 3Complivit Woman 45+ Nov09 A11A - multivitamins with minerals 252Complivit Active (Chewing), 3-10 years Nov09 A11A - multivitamins with minerals 252Codelac Broncho, syrup Dec09 R05D - antitussives 110Codelac Broncho, tablets Jun09 R05D - antitussives 110Magnelis B6 Apr09 A12C - other mineral supplement 36Zinocap, aerosol Sep09 D05A - topical antipsoriasis product 22Zinocap, cream Sep09 D05A - topical antipsoriasis product 22

New Products

Launched

Launched

Launched

Launched


Top 10 OTC Brands 1H 2009



salesVolume (mln

packs)Sales (mln

RUR)% of total

sales Change % Change %1 Arbidol 12,329 1 475 26% 9,962 1 021 24% 2,368 24% 454 44%2 Pentalgin 18,306 945 16% 14,051 690 16% 4,255 30% 255 37%3 Complivit 7,164 487 8% 5,426 342 8% 1,738 32% 144 42%4 Codelac 3,392 339 6% 2,762 157 4% 0,630 23% 183 116%5 Flukostat 2,663 310 5% 2,316 268 6% 0,347 15% 42 16%6 Terpincod 2,151 302 5% 9,083 799 18% -6,932 -76% -497 -62%7 Afobazol 1,297 191 3% 0,000 0 0% 1,297 - 191 -8 Amixin 0,399 175 3% 0,293 127 3% 0,106 36% 48 38%9 Corvalol 26,431 126 2% 22,260 93 2% 4,171 19% 33 36%

10 IRS-19 0,439 107 2% 0,000 0 0% 0,439 - 107 -Other brands 236,675 1 274 22% 201,027 827 19% 35,648 18% 447 54%TOTAL SALES 311,247 5 732 100% 267,179 4 324 100% 44,068 16% 1 408 33%

1H 2009 1H 2008 Sales 09/08Volume 09/08

Newcomers in the list: Afobazol and IRS-19 Pharmstandard demonstrated total OTC growth of 33%, (16% volume growth)


Arbidol (1): 1H09 vs 1H08

OTHER9,8%

ANTIGRIPPIN(ANTIVIRAL NPO ZAO)

4,7%

VIFERON(FERON OOO)

9,1%

ANAFERON(MATERIA MEDIKA)

11,6%

OSCILLOCOCCINUM(BAURON)

16,1%

CYCLOPHERON(POLYSAN)

4,6%

AMIXIN(PHARMSTANDARD)

4,4%

ARBIDOL(PHARMSTANDARD)

29,7%

ANTIGRIPPIN(NATUR PRODUCT)

3,6%

IMMUNAL(SANDOZ)

3,5%

GRIPPFERON(FIRN-M ZAO)

2,9%

• Absence of national flu outbreak in 1Q09

• Growth of media pressure of main competitors

• Positive trend in 1H09 stipulated by launch of new SKU #20 capsules

Trends “Anti-flu” rebuilt market

• Retail Sales: + 9% (rub), -11% (units)• MS in RUR: 30% vs 36% • Market growth RUR: + 21%• Market growth Units : +6%

Summary


Arbidol (2) • Brand growth became slower, but trend is positive (+9%)

• Brand awareness is growing*: 5.7 mln vs 5.1 mln

• Brand consumption is growing*: 3.1 mln vs 2.9 mln

Actions:

• Announcement of results of Arbidol testing on “swine flu” model

• Announcement of official local guidelines regarding “swine flu” treatment

• Increase in media pressure in 2H 2009

• DTC campaign against homoeopathic remedies

Expectations:

• Sales growth in 2HY2009 vs 2HY2008

• Market share recovering

• Crucial issue: autumnal flu out-break

* - Gallup. All Russia population, 16+


Pentalgin:1H09 vs 1H08

• Increase of average unit price because of launch of new Pentalgin Plus (premium segment)

• Actions: new communication (TV copy) in 2H 2009 and enhancement of media campaign

• Expectations: Retail sales growth 2H09 vs 2H08

Trends Analgesics Market

Summary

OTHER34,6%

BARALGIN(SOTEKS)

5,1%

TEMPALGIN(SOPHARMA AO)

6,2%

CARDIOMAGNIL(NYCOMED)

6,2%

NUROFEN(REKITT BENKISER HEALTHCARE)

7,8%

SEDALGIN(ACTAVIS)

4,3%

SOLPADEIN(GSK)4,1%

PENTALGIN(PHARMSTANDARD)

21,9%

SEDAL-M(SOPHARMA AO)

3,9%

ALCA-ZELTZER(BAYER HEALTHCARE)

3,1%

PIRALGIN(BELMEDPREPARATY)

2,8%

• Retail Sales: + 22% (rub), 2% (units)• MS in RUR: 22% vs 25%, units – no

changes• Market growth RUR: + 38%• Market growth Units : +2%


Complivit:1H09 vs 1H08

• Vitamins Market decreased in units by -7%, Complivitdecreased only by 4%

• Complivit shows sustainable growth in value, because (1) sub-brands launches (2) new communication (3) TV investments

• Decrease of MS in value stipulated by growth of average price of imported vitamins (+40%). PHST average price increase 4%, Complivit 24%

• Actions: keep communication and TV investments, launches of new forms: Complivit Siyanie, ComplivitDiabetes, Complivit Anti-Stress

• Expectations: 2H09 sales – not less than that in 2H08

Trends Vitamins Market

Summary

AEVIT(LUMI OOO)

2,5%

CALCEMIN(BAYER HEALTHCARE)

2,9%

PICOVIT(KRKA)3,6%

VITRUM(UNIPHARM INC)

19,7%

AQUADETRIM(POLPHARMA)

3,7%

ELEVIT(BAYER HEALTHCARE)

4,1%

COMPLIVIT(PHARMSTANDARD)

12,5%

CA-D3(NYCOMED)

8,6%

MULTI-TABS(FERROSAN)

8,0%SUPRADIN

(BAYER HEALTHCARE)7,6%

OTHER26,8%

• Retail Sales: + 21% (rub), -4% (units)• MS in RUR: 13% vs 14%, units – 13% vs

12.7% changes• Market growth RUR: + 31%• Market growth Units : -7%


Afobazol:1H09 vs 1H08


• Unique Product

• Successful marketing mix in 1H09

• Brand awareness and usage grew more than 2 times*

• Actions: new TVC, new educational media projects, launch of National Anxiety School (for medical doctors)

• Expectations: Growth of sales, further brand development

Trends Sedatives and Tranquilizers Market

Summary

OTHER45,1%

DONORMIL(BMS)4,6%

AFOBAZOL(PHARMSTANDARD)

6,3%

PERSEN(SANDOZ)

7,4%

VALOCORDIN(KREVEL MOISELBACH GMBH)

9,3%

FENAZEPAM(VALENTA)

4,5%

VALOSERDIN(MOSCOW PHARMFABRIKA)

4,1%

NOVO-PASSIT(TEVA PHARM)

9,5%

CORVALOL(PHARMSTANDARD)

3,9%

GRANDAKSIN(EGIS)2,9%

CORVALOL(SESANA ZAO)

2,4%

• Retail Sales: + 92% (rub), 52% (units)• MS in RUR: 6% vs 4%, units: 1% vs

0.6% changes• Market growth RUR: + 32%• Market growth Units : -2%


Flukostat:1H09 vs 1H08

• Leading position on its market

• Growth of brand awareness and brand usage*

• Market issue: switching to local cheaper unbranded flukonazoles (“ looks-like brands”)

• Actions: new TVC, enhancement of media campaign (internet, product placement), BTL against unbranded flukonasoles, new package design

• Expectations: keeping market share

Trends Antifungal Market

Summary

OTHER25,8%

IRUNIN(VEROPHARM ZAO)

6,0%

MICOMAKS(ZENTIVA A.S.)

7,0%

MICOSYSTGEDEON RICHTER)

9,3%

DIFLUCAN(PFIZER)15,9%

ORUNGAL(JANSSEN-CILAG)

4,9%

LAMISIL(NOVARTIS)

4,8%

FLUCOSTAT(PHARMSTANDARD)

18,0%

RUMIKOZ(VALENTA)

3,3%

NISORAL(JANSSEN-CILAG)

2,5%

EXIFIN(DR. REDDY'S)

2,5%

• Retail Sales: + 2% (rub), -8% (units)• MS in RUR: 18% vs 21%, units: 21% vs

23% changes• Market growth RUR: + 15%• Market growth Units : +3%



Codelac:1H09 vs 1H08

• PHST keeps its leading position on this market with the brands Codelac (Codelac tabs, Codelac phytoelixir) and Terpincod

• 1H 2009:local regulatory restrictions limiting retail merchandizing for codeine-containing products

• Decrease in media investments + increase in price profit optimization

• Actions: Launch of new codeine-free sub-brand:Codelac Broncho, start of its media campaign in 2010

• Codeine products: cash cows

Trends Anti-cough Market

Summary

OTHER31,8%

PULMOZIM(ROCHE)

6,0%

TERPINCOD(PHARMSTANDARD)

8,3%

CODELAC(PHARMSTANDARD)

8,5%

ACC(SANDOZ)

10,6%

AMBROBENE(RATHIOPHARM)

5,3%

ASCORIL(GLENMARK PHARM)

5,0%

LASOLVAN(BOEHRINGER INGELHEIM)

13,2%

DOCTOR MOM(UNIC PHARM)

4,6%

BROMHEXIN(BERLIN-CH/MENARINI)

3,7%

GEDELIKS(KREVEL MOISELBACH GMBH)

3,1%

• Retail Sales: + 56% (rub), -14% (units)

• MS in RUR: 9% vs 7%, units: 3% vs4% changes

• Market growth RUR: + 21%• Market growth Units : -7%


Top 10 Rx Brands 1H 2009



salesVolume (mln

packs)Sales (mln

RUR)% of total

sales Change % Change %1 Velcade 0,040 2 278 23% 0,000 0 - 0,040 - 2 278 -2 Mildronate 3,087 674 17% 3,089 627 47% -0,002 0% 46 7%3 Phosphogliv 0,934 326 8% 0,727 238 18% 0,206 28% 88 37%4 Biosulin 0,180 91 2% 0,168 71 5% 0,011 7% 20 29%5 Combilipen 0,744 74 2% 0,074 6 0% 0,671 910% 69 1195%6 Reduxin 0,066 68 2% 0,032 25 2% 0,033 103% 43 174%7 Pikamilon 2,118 57 1% 1,305 23 2% 0,813 62% 34 146%8 Cyclodol 1,249 51 1% 0,982 33 3% 0,267 27% 18 54%9 Azitrox 0,254 41 1% 0,150 22 2% 0,105 70% 19 86%

10 Renipril 0,944 35 1% 0,880 31 2% 0,064 7% 5 16%Other brands 12,562 319 8% 9,711 251 19% 2,851 29% 68 27%TOTAL SALES 22,177 4 015 100% 17,118 1 327 100% 5,059 30% 2 688 203%

1H 2009 1H 2008 Volume 09/08 Sales 09/08

Pharmstandard demonstrated total Rx value growth (excluding Velcade) of 31%,(30% volume growth)


Phosphogliv:1H09 vs 1H08

• Positive brand dynamics both in value and in volume

• MS growth in volume

• Decrease of MS in value stipulated by price increase of imported brands

• Actions: keep the product in active promotion, spreading of positioning

• New post marketing clinical trials

Trends Hepatoprotectors Market

Summary

OTHER5,1%

ESSLIVER(STADA ARZNEIMITTEL AG)

6,6%

BERLITION(BERLIN-CH/MENARINI)

6,8%

CARSILSOPHARMA AO)

8,9% GEPTRAL(EBBOT)22,1%

PHOSPHOGLIV(PHARMSTANDARD)

5,8%

TIOCTACID(TEVA PHARM)

4,1%

ESSENTIALESANOFI-AVENTIS)

32,9%

GEPA-MERZ(MERZ GMBH)

3,1%

LIV-52(HIMALAYA DRUG COMPANY LTD)

2,4%TIOGAMMA

(WORWAG PHARMA GMBH)2,3%

• Retail Sales: + 22% (rub), +5% (units)• MS in RUR: 6% vs 7%, units: 5% vs

4% changes• Market growth RUR: + 41%• Market growth Units : -4%


Summary

1H 09 Tendencies

• Positive sales dynamic for most top brands in volume

• Negative trend or stagnation in volume stipulated by both general ATC trend (vitamins, analgesics) and external factors (e.g. absence of flu outbreak)

• Market keeps “media sensitivity”. Moderate approach for media investments in 1H09 ensured profit growth but some enhancement is needed for further sales development

2H 09 Actions

• New TV communications, additional media investments

• Price control in retail


Medical Division. R&D

Viacheslav Burmistrov, Medical Director


Deputy GM of drug circulation

Drug circulation department

New products registration dpt

Medical department

Drug Circulation Division


• Pharmaceuticals and medical equipment registration (av 100/year)

• Manufacture facilities licensing

• Products release regulatory management

• Management of state control process

Drug Circulation Division: Roles & Functions (1)


Drug Circulation Division: Roles & Functions (2)

• New products search and development

• Medical / marketing strategy development

• Scientific research (preclinical&clinical tests)

• Medical information & expertise

• Registration support

• Pharmacovigilance


Pharmacovigilance

• Pharmstandard is the local leader in pharmacovigilance

• The only local manufacturer is a member of pharcovigilance working group in Federal service (FSS HSD RF)

• The PV system in PHST is easy and available for all parties (patients, health care providers, medical representatives)


60

3%

4%

7%

11%18%

40% 4%

2%

Amgen Bayer Solvay-pharmaBoehringer Ingelheim Sopharma Novo NordiskJanssen-Cilag Servier Hoffmann-La RocheIbsen biopharm Merck Sanofi-AventisPharmstandart Pliva NovartisOrganon Eli Lilly Schering-PloughGlaxoSmithKline

GlaxoSmithKline

Schering-Plough Eli Lilly

Organon

Novartis

Ibsen biopharm Pharmstandard

Pliva

Pharmstandard is a local leader in AE* reporting (2008)

* - AE – adverse effects


Drug Development & Research

• Discovery & Development

• Preclinical testing

• Clinical trials (CT), 4 phases according to GCP


Discovery & Development Phase

• New potential active compound selection (Arbidol, Afobazol, Phosphogliv)

• New combinations development based on pharmacological approaches (Codelac Broncho, Pentalgin Plus, Complivit Oftalmo)

• New compositions testing


Examples of CT in Pharmstandard

• CTs of Biogenerics: Rastan, Neipomax

• CT of original combination: Codelac broncho

• Study of therapeutic equivalence: Zinocap cream and sprey

• Bioequivalence studies for generic drugs: Bloctran

• Postregistration studies, phase IV: Liptonorm, Benfolipen, Phosphogliv, Neupomax


Arbidol Discovery and Development

• Discovered in 1974

• Studied for 15 years before clinical usage

• Antiviral activity was proved in numerous studies performed in leading Russian research centers and independent laboratories in USA, UK, Australia, France and China.

• Efficacy and safety was confirmed in clinical studies in more than 17 000 patients


Arbidol Antiviral Profile

• Active against А and В influenza viruses, including H1N1, H2N2, H3N2 and Н5N1 subtypes.

• Active against a number of other acute respiratory viral infection (ARVI) viruses (adenovirus, respiratory syncytial virus, coronavirus, including SARS virus).


Mechanism of Action

Arbidol® has a direct antiviral effect. Arbidol®belongs to fusion inhibitors; it interacts with the virus hemagglutinin and thus prevents fusion of the viral envelope with cell membranes.


International Publications

2006• VIROLOGY JOURNAL

Boriskin Y., Pecheur E., Polyak S. Arbidol: a broad-spectrum antiviral that inhibit acute and chronic HCV infection// Virology Journal. – 2006. – 3: 56.

• JOURNAL OF PHARMACEUTICAL AND BIOCHEMICAL ANALYSISXiao Liu, Yu-Wei Huang, Juan Li, Kai-Shun Bi, Xiao-Hui Chen Determination of arbidol in plasma by LC-ESI-MS// Journal of pharmaceutical and biochemical analysis. – 2006. – June

2007• ARCHIVES OF VIROLOGY

Shi L, Xiong H, He J, Deng H, Li Q, Zhong Q, Hou W, Cheng L, Xiao H, Yang Z. Antiviral activity of arbidol against influenza A virus, respiratory syncytial virus, rhinovirus, coxsackie virus and adenovirus in vitro and in vivo// Arch Virol . -2007.- May

2008• CURRENT MEDICINAL CHEMISTRY

Boriskin Y., Leneva I., Pecheur E., Polyak S. Arbidol: a broad-spectrum antiviral compound that bloks viral fusion// Current Med. Chem.- 2008.-15.-Р.997-1005

• JOURNAL OF MASS SPECTROMETRYYuya Wang, Xaioyan Chen, Qiang Li, Dafang Zhong Metabolite identification of arbidol in human urine by the study of CID fragmentation pathways using HPLC coupled with ion trap mass spectrometry// Journal of mass spectrometry 2008; 43: 1099-1109.

2009• ANTIVIRAL RESEARCH

Leneva I., Russel R.J., Boriskin Y., Hay A. Characteristics of arbidol-resistant mutants of influenza virus: implications for the mechanism of anti-influenza action of Arbidol// Antiviral Research.-2009 Feb;81(2):132-40


2009 Swine Influenza Studies

• Vector, Novosibirsk

• Virology Research Institute of the RAMS, Moscow

• Grippe Research Institute of the RAMS, St.Petersburg

Arbidol is proven to be active against viruses A/H1N1 California and Moscow strains

Arbidol is included in MoH recommendation on prevention and treatment of influenza caused by A/H1N1


About 25% of individuals worldwide reports a

lifetime history of at least 1 anxiety disorder.

Anxiety disorder is 2 times more common in

women than in men.

Our Life is a Non-stop Stress:

• Overload at work

• Family issues

• Financial issues

• Health issues

• Exam anxiety

• Traffic jams

Afobazol


Afobazol: Discovery and Development

• Developed 15 years ago in the light of the pharmacogenetictheory of anxioselectivity at the Research Institute of Pharmacology named by V.V. Zakusov of RAMS

• Development and preclinical testing last more 10 years

• Selective anxiolityc effect and excellent safety profile were proven in 24 clinical studies in 1 500 patients in various therapeutic areas


Afobazol: Clinical Trials

• BASIS – an open multicenter clinical study of efficiency and safety of Afobazol in patients with neurotic and stress induced disorders.

- conducted in 26 clinical centers (792 patients enrolled) in 22 regions of Russia

- supervised by the outstanding experts in psychiatry from the leading centers

• Subsequently monitored in 17 post-registration clinical studies on combined therapy of psycho-somatic disturbances (anxiety plus somatic disorders) in cardiology, pulmonology, gastroenterology, connective tissue disorders, dermatology, gynecology, toxicology (more than 1500 patients enrolled)


Afobazol: a New Generation of Anti-anxiety Drugs

• Selective anxiolytic (anti-anxiety) medication not related to benzodiazepines

• Interacts with specific sigma-1 (non-benzodiazepine) receptors in the brain cells

• Reactivates receptor sensitivity to GABA-mediator (an inhibitor of extra-excitement) and thus provides the anti-anxiety effect

• Has a combined anxiolytic and slight activating effect

• Diminishes and/or blocks up a feeling of panic and being “edgy”, apprehensive expectation, fear, uneasiness, difficulties sleeping, restlessness, muscle tension, fatigue

• Alleviates various anxiety symptoms such as palpitations, sweating, hot flushes, chills, cold or sweaty hands, dizziness, dry mouth, lump in a throat, nausea, diarrhea or constipation


Afobazol: Outstanding Features and Advantages

• Excellent safety characteristics:

- Does not cause drug dependency/ rebound effect

- Does not cause sedation, myorelaxation

- Does not cause memory or attention concentration falls (no need to avoid driving while medication is taken)

• Over-the-counter medication

• Anxiolytic effect launches on the 5th-7th day of treatment, maximum effect is achieved in 2-4 weeks of treatment

• Especially helpful for individuals with accentuated emotional instability, excessive and persistent sense of apprehension, uneasiness, difficulties stress coping and adaptation


Afobazol: Indications

• Anxiety disorders: generalized anxiety disorder, adaptation disorder, neurasthenia, anxiety as a comorbidity of somatic diseases (asthma, irritable bowel syndrome, lupus, coronary artery disease, hypertension, atrial fibrillation, oncology and dermatology conditions)

• Sleep disturbances associated with anxiety

• Neurocirculatory asthenia

• Premenstrual syndrome

• Alcohol withdrawal syndrome

• Tobacco withdrawal syndrome


Afobazol: Clinical Applications

• Neurology

• Psychiatry

• Cardiology

• Gastroenterology

• Pulmonology

• Dermatology

• Gynecology

• Oncology


Disclaimer and Confidentiality Requirements

This presentation does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire securities of OJSC Pharmstandard (the “Company”) or any of its subsidiaries in any jurisdiction or an inducement to enter into investment activity. No part of this presentation, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever.

The information contained in this presentation has not been independently verified. No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. None of Augment Investments Limited (the “Selling Shareholder”) or the Company or any of their respective affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection with the presentation.

This presentation is only for persons having professional experience in matters relating to investments and must not be acted or relied on by persons who are not Relevant Persons (as defined below). Solicitations resulting from this presentation will only be responded to if the person concerned is a Relevant Person.

This presentation and its contents are confidential and must not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other person, whether or not such person is a Relevant Person. Failure to comply with this restriction may constitute a violation of applicable securities laws. If you have received this presentation and you are not a Relevant Person you must return it immediately to the Company. This presentation does not constitute a recommendation regarding the securities of the Company.

This presentation is not a public offer or advertisement of Securities in the Russian Federation and is not an invitation to make offers to purchase any Securities in the Russian Federation, and must not be passed on to third parties or otherwise be made publicly available in Russia. The GDRs have not been and will not be registered in Russia and are not intended for “placement” or “circulation” in Russia.

This presentation includes 'forward-looking statements'. These statements contain the words "anticipate", "believe", "intend", "estimate", "expect" and words of similar meaning. All statements other than statements of historical facts included in this presentation, including, without limitation, those regarding the Company’s financial position, business strategy, plans and objectives of management for future operations (including development plans and objectives relating to the Company's projects and services) are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company to be materially different from results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company's present and future business strategies and the environment in which the Company will operate in the future. These forward-looking statements speak only as at the date of this presentation. Each of the Company and the Selling Shareholder and their respective agents, employees and advisers, expressly disclaims any obligation or undertaking to update any forward-looking statements contained herein.

The information and opinions contained in this document are provided as at the date of this presentation and are subject to change without notice.

All information not separately sourced is from Company data.

Market information provided by Pharmexpert MRS in retail prices.

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